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The Government wants bigger
businesses to be able to choose suppliers and Ofwat believes the changes
are needed to make this work.

Water UK, which represents the
industry, fears the effect that Ofwat’s changes may have on the sector. A
spokesman said: ‘Companies may not be able to reconcile the flexibility
that Ofwat is seeking.

‘They will want to maintain investor
confidence and the low costs of financing that the sector enjoys, which
keep customers’ bills as low as possible.

‘The stable, predictable and
transparent regulatory regime for the industry has underpinned
£110 billion of investment at low borrowing costs since 1989.’

Water companies fear that the changes
will make the industry less attractive to investors. Since Ofwat issued
its notice last month, shares of the leading stock market-quoted water
firms have fallen sharply.